Autodesk Bounces Back After Steep December Drop

Autodesk (ADSK) is currently priced at $135 per share. The stock dipped about 10 percent this past December in unison with the rest of the market. Autodesk jumped right back, gaining nearly 8 percent through the start of the new year. Investors willing to tolerate volatility should consider adding Autodesk to their portfolio. Here’s why.

Autodesk’s primary money-maker has been computer-aided design (CAD) of buildings and manufactured parts. Autodesk has emerged as a force in the architecture industry, construction industry and the even in the 3D modeling space. The company provides three-dimensional models of parts. Autodesk has increased its products line across the past decade to extend beyond modeling. The company is no longer limited to simply drawing part fabrications or commissioning buildings. Autodesk’s building informational model is a comprehensive group of services that ultimately make work in all sorts of important fields that much more efficient.

Though the modeling parts business has a different end market than the rest of Autodesk’s services, the company’s modeling software has proven quite valuable. This software has made it possible for parts to be made along with injection molding, stress analysis and milling design implemented right into the software package. These features are important to designers as they empower them to predict and perfect the manner in which parts are produced and ultimately used for real world applications. Autodesk has assembled an ecosystem of products and services that are likely to grow in importance as we transition to a high-tech, heavily automated world.

Autodesk’s recent slide should not be concerning as the majority of the stock market was down in the final quarter of 2018. December was particularly brutal. Autodesk bounced back in the new year partially because the company has made some strategic acquisitions in recent months. This included Building Connected, a group that specializes in bid management software. The construction productivity software maker PlanGrid was also brought into the fold. These two additions enhance Autodesks’s appeal to construction companies. Now that Building Connected and PlanGrid are a part of Autodesk, the business’s full ecosystem of offerings is quite extensive. It is clear Autodesk has established a foothold as a power player in the building and construction markets.

Autodesk increased in value by more than 20 percent across the entirety of 2018. The software specialist outperformed the S&P500 by a considerable margin as the index dropped more than 5 percent for the year. All in all, Autodesk’s stock has more than doubled in value since the initial months of 2016. The company’s second quarter report dazzled with revenue climbing nearly 120 percent to $1.7 billion. Autodesk revenue surpassed expectations, sales spiked thereafter and the yearly top and bottom line targets were elevated.

The question is whether prospective investors have missed out on Autodesk’s rally or if the stock is on a continued upward trajectory. Pay close attention to Autodesk’s upcoming quarterly earnings report. If the numbers show meaningful growth in earnings with expanding operating margins, investors should consider a stake in Autodesk. However, it must be noted Autodesk has suffered a net loss for nine consecutive months. Some question whether 2019 will finally be the year Autodesk gets out of the red and into the black.

Investors on the prowl for value steals will likely be scared away by Autodesk’s seemingly inflated price. The stock has been propelled by a series of strategic decisions that have paid off in an ever-changing industry. Autodesk has successfully pivoted to a subscription business model. This decision has paid off quite handsomely, boosting revenue and improve the company’s long-term prospects. The company is also moving toward digitizing its processes and enhancing is production and manufacturing processes.

It is clear Autodesk is rebounding from its struggles in 2015-2016. The construction market will continue to grow in the coming years and decades, making Autodesk that much more attractive to investors. Do not hesitate to add Autodesk to your portfolio for the long haul.

Regards,

Ethan Warrick
Editor
Wealth Authority


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